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petitioner is not entitled to the charitable contribution
deduction claimed on his return, and respondent’s disallowance of
that deduction is sustained.
2. Schedule C Items
The Schedule C included with petitioner’s return shows a net
operating loss of $62,884, that, as described above, consists of
cost of goods sold, plus various expense deductions. Cost of
goods sold is properly taken into account in determining a
taxpayer’s net income or loss from business, as are business
expenses deductions. Sec. 162(a); sec. 1.162-1, Income Tax Regs.
Items that are included in the taxpayer’s computation of cost of
goods sold as well as business expense deductions must be
properly substantiated.
Petitioner did not maintain any books of account for the
business. At trial, petitioner suggested that if given more
time, he would be able to produce bank records, canceled checks,
and retirement plan documents that would support his claim to the
items shown on the Schedule C. The record was held open for
approximately 90 days to allow petitioner to obtain and submit
additional evidence, but he failed to do so. As it turns out,
other than petitioner’s vague testimony on the items, nothing in
the record supports his claim to the cost of goods sold or
deductions claimed on the Schedule C. Respondent’s disallowances
of those items are sustained.
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Last modified: May 25, 2011